Stablecoin regulation in Hong Kong has officially entered uncharted territory. The city’s Legislative Council passed the Stablecoins Bill on 21 May 2025, creating what may be Asia’s most aggressive attempt yet to regulate the $170 billion stablecoin market.
But here’s the thing: while Hong Kong positions itself as crypto-friendly, this new law imposes some of the strictest requirements globally for stablecoin issuers. The question isn’t whether this framework will work—it’s whether it will actually attract the innovation Hong Kong claims to want, or simply create another compliance hurdle that benefits only the biggest players.
What are stablecoins and why do they matter?
Stablecoins are cryptocurrencies designed to maintain stable value by being pegged to reference assets, typically fiat currencies like the US dollar or Hong Kong dollar.
Unlike volatile digital assets such as Bitcoin, stablecoins offer price stability – making them attractive for cross-border payments and remittances – and as a bridge between traditional finance and the cryptocurrency ecosystem.
The global stablecoin market has grown substantially, with industry observers noting their potential to revolutionise payment systems. “Stablecoins have the potential to shorten the time for cross-border payment from days to minutes,” said Teddy Liu, CEO of Jingdong Coinlink Technology, highlighting the efficiency gains these digital assets can provide.
Key provisions of Hong Kong’s stablecoin law
Licensing requirements
Under the new Hong Kong stablecoin regulation framework, any person conducting business involving FRS issuance in Hong Kong must obtain a license from the Hong Kong Monetary Authority (HKMA).
This requirement extends to stablecoins that maintain stable value with reference to Hong Kong dollars, regardless of where they are issued globally.
The legislation defines regulated activities broadly, covering not only direct issuance but also the offering of specified stablecoins and related advertising. Unauthorised activities in these areas constitute criminal offences under the new law.
Financial and operational standards
Licensed issuers must meet stringent criteria, including:
- Minimum capital requirements: HK$25 million in paid-up share capital or equivalent financial resources
- Reserve asset management: Maintaining high-quality, liquid reserves with minimal investment risks, segregated from other assets
- Redemption guarantees: Processing stablecoin holders’ redemption requests at par value without unreasonable conditions
- Risk management systems: Implementing comprehensive controls for anti-money laundering, conflict management, and business continuity
Consumer protection measures
The law prioritises user protection through several mechanisms. In cases of issuer insolvency, stablecoin holders gain direct rights to reserve assets for redemption purposes on a pro-rata basis. Additionally, only licensed institutions may offer FRS to retail investors, and only advertisements for licensed FRS issuance are permitted.
Industry response and market implications
The passage of Hong Kong stablecoin regulation has generated significant interest from mainland Chinese institutions and companies. According to the South China Morning Post’s report, analysts at Citic Securities noted that the new framework could facilitate mainland companies’ real-world asset (RWA) tokenisation projects in Hong Kong, with stablecoins serving as stabilising tools to increase market liquidity.
“Hong Kong has entered a stage of accelerated growth of tokenised RWAs,” wrote Ying Ying, an ana
